The global containership fleet is currently projected to grow by 8.3% this year, and 8.4% next year. However, fleet expansion is projected to be extremely biased towards growth in the larger end of the fleet. This trend has clearly been driven greatly this year by orders of large 8,000+ TEU ships. However, the bias towards large deliveries has also received some impetus from removals and cancellations from the orderbook.
Dual Orderbook
The Graph of the Month shows the orderbook split by contract date. This puts the lack of ordering in 2009 into perspective, dividing the orderbook into ships ordered pre-2009 and ships ordered post-2009 (or post-1H 2010, as 89% of vessels and 98% of the capacity ordered in 2010 was ordered in 2H 2010).
The graph also shows the average size of ships remaining on order, split by contract date, as well as the average size of ship contracted in that year for comparison. The current orderbook of ships contracted post-2009 numbers 327 of an average 7,160 TEU, a similar size to that of vessels contracted during the same years. However, the average size of vessels contracted in 07/08 which are still on order is 7,137 TEU. This is a marked increase from the average size of all boxships ordered in 07/08 (5,741 TEU).
Cancel Small, Slip Big
One reason for this difference is cancelations. Of the 768 ships ordered in 07/08, 366 ships of an average 5,341 TEU have been delivered. Of the remaining 401 vessels, 31% (123 ships of 470,000 TEU) have been cancelled, while the remainder is still on order. While this is clearly significant, it is more so if you consider how biased this is towards smaller ships. 81% of these cancelled vessels had a capacity less than 5,000 TEU. As such, 21% of all sub-5,000 TEU contracts in 07/08 have been cancelled compared to just 8% of all 5,000+ TEU contracts.
So a greater proportion of small ships ordered pre-2009 have tended to be cancelled compared to larger ships, which if not delivered, have tended to have ‘slipped’ delivery dates. This is hardly surprising in the current economic climate. Not only were vessel prices pre-downturn 20-30% higher than at the moment, small ship orders are more likely to have come from owners less able to secure finance in the current economy, while big ship orders are more likely to have been by operators who require larger ships to compete efficiently, and thus are more likely to want to keep scheduled delivery dates.
The Only Way is Up?
The average size of ships on order now (6,900 TEU) is larger than at any point in history, and is getting larger. The impact of this on the market, however, may be mixed. An orderbook of large ships is bad news for the currently oversupplied mainlane trades. However, the cancellation of small ship orders may eventually help to reduce supply pressure on non-mainlane trades which is being caused by cascading at the moment.